TDS ON ESOP
This query is : Resolved
10 March 2011
Whether we can issue the ESOP to Executitive Directors (WTD)who is not in our payroll ?
We are paying Commissioin to them instead of Remuneration.
Whether our stand is right?
Is there any violation in the company law and what is the consequence?
we are deducting the TDS on ESOP u/s 194J and with the request of the director TDS @ 30.9%.
Whether we are right?
We are paying Commissioin to them instead of Remuneration.
Whether our stand is right?
Is there any violation in the company law and what is the consequence?
we are deducting the TDS on ESOP u/s 194J and with the request of the director TDS @ 30.9%.
Whether we are right?
11 March 2011
Dear Susil
As per supreme court ruling Directors are not employee of the company.
(See Necanicum Investment Co. v. Employment Department, 214 Or App 385, 164 P3d 1197 (2007). On July 24, 2008, the Oregon Supreme Court reversed that decision, holding that because corporate directors, serving solely as directors, do not fall within the definition of an "employee")
1. Salary & perquisite : S. 17(1) of the Income-tax Act, 1961 contains an inclusive definition of ‘Salary’ which includes inter alia ‘any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages’.
The ESOP availed or SE received by an employee would not amount to salary, fee, commission or profit in lieu of salary. At the maximum, it can be argued to be a ‘perquisite’.
so only one thing left that we have to treat the same as their professional income and deduct TDS under section 194J.The Esop can not be issued to the pramoter of the comany and directors who is holding more than 10%of the company's share.
7. Whether ESOPs issued to non-executive directors or non- employees liable to FBT?
Answer: Benefit arising out of ESOPs issued to non-employees will not be liable to FBT. However, in such cases, the taxability of such benefits in the hands of the non-employees will be determined in accordance with the existing law.(if it is not covered by FBT so it can't be Deducted under section192b)
Conclusion
Only way Deduct TDS under section 194 J
As per supreme court ruling Directors are not employee of the company.
(See Necanicum Investment Co. v. Employment Department, 214 Or App 385, 164 P3d 1197 (2007). On July 24, 2008, the Oregon Supreme Court reversed that decision, holding that because corporate directors, serving solely as directors, do not fall within the definition of an "employee")
1. Salary & perquisite : S. 17(1) of the Income-tax Act, 1961 contains an inclusive definition of ‘Salary’ which includes inter alia ‘any fees, commissions, perquisites or profits in lieu of or in addition to any salary or wages’.
The ESOP availed or SE received by an employee would not amount to salary, fee, commission or profit in lieu of salary. At the maximum, it can be argued to be a ‘perquisite’.
so only one thing left that we have to treat the same as their professional income and deduct TDS under section 194J.The Esop can not be issued to the pramoter of the comany and directors who is holding more than 10%of the company's share.
7. Whether ESOPs issued to non-executive directors or non- employees liable to FBT?
Answer: Benefit arising out of ESOPs issued to non-employees will not be liable to FBT. However, in such cases, the taxability of such benefits in the hands of the non-employees will be determined in accordance with the existing law.(if it is not covered by FBT so it can't be Deducted under section192b)
Conclusion
Only way Deduct TDS under section 194 J
11 March 2011
Thank You sir
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